China's Foreign Currency Regime: The Kagan Thesis and Legalification of the WTO Agreement
Posted: 7 Jul 2004
Following China's accession to WTO, controversy surrounded China's foreign currency exchange regime, which, since 1994, has pegged the Chinese currency (yuan), at about 8.28. The United States should exercise caution, as opposed to politically motivated responses in answer to issue of pegging yuan, otherwise, its' actions may constitute the signaling of unilateralism in international trade, a charge that the United States must be wary of for obvious reason. There is a discernible trend towards soft globalization, not hard globalization, emphasizing multilateralism in both international trade and governance of international trade. An invocation of politics and protectionism presents danger of an other world perception of the United States exercising unilateral acts, resembling unilateralism, as espoused by Kagan thesis, often employed by the United States pursuant to foreign policy.
This article addresses issue of whether the China-yuan-controversy, taken in conjunction with Kagan thesis and justification of unilateral acts in international relations, presage the legalification (Verrechtlichung) of the WTO agreement. Although there is a WTO dispute mechanism for resolving trade disputes based upon norm of economic equality, the United States failed to avail itself of the WTO dispute mechanism, instead, electing what is reasonably interpreted as unilateral acts, politically motivated responses to drop in value of dollar. The gravest danger presented is legalification of the WTO agreement, because unilateral acts, resembling unilateral exercises of uni-polar United States military and political power, pursuant to United States foreign policy, threatens and undermines the power and authority of the WTO and governance of international trade.
Keywords: China, WTO, foreign currency rate, regime, trade policy, globalization, governance, unilateral, multilateral, international relations, legalification, Kagan Thesis
JEL Classification: K33, F19
Suggested Citation: Suggested Citation